2023-07-20 16:12:50
The Dax has gained around 16 percent this year, the American Dow Jones index has gained 6 percent – both in an environment full of economic concerns, in the midst of declining but still high inflation and rising interest rates. According to the Federal Statistical Office, the inflation rate in Germany was 6.4 percent in June. Many institutional investors are cautious and pessimistic, as Bank of America’s most recent survey of fund managers shows. Accordingly, the sentiment of the 222 fund managers surveyed around the world in July, who collectively manage $588 billion in assets, remains negative (“bearish”). “Fear” is greater than greed, write the experts at Bank of America, citing “fearflation”.
Most fund managers expect a mild recession to begin in the fourth quarter of 2023 or the first of 2024. After all, the number of asset managers who do not expect a downturn before 2025 has increased. A net 60 percent of those surveyed – this is the amount by which the proportion of those who believe this outnumber those who expect the opposite – expects weaker growth in the global economy. A good two-thirds of the asset managers surveyed assume that there will be a soft landing. That is far more than the 21 percent who expect a hard economic landing with more serious consequences (“hard landing”).
It is fitting that the portfolios currently have the largest underweight in commodities on average since May 2020. In addition, the largest decline within ten years was observed over a three-month period. Many commodities are considered to be indicators for the progress of the economy, especially copper. The survey also shows that the average value of cash in wealth managers’ portfolios rose to 5.3 percent from 5.1 percent in June – again a sign of the cautious stance of these investors. In October 2022, however, it was still 6.3 percent.
Private investors more confident
Many fund managers’ view of companies has improved somewhat. Earnings forecasts are said to be the least pessimistic since February 2022. Nevertheless, half of those surveyed expect that the global earnings outlook will likely deteriorate over the course of the year. Although the allocation to equities has reached a seven-month high, on a net basis almost a quarter of the fund managers remain relatively underweight relative to the benchmark. This is in contrast to American private investors, for example, who are as confident (“bullish”) as they were last at the end of 2021, they say.
And how do the pros invest? Betting on rising prices of the big technology stocks is the most popular trading strategy (“Long Big Tech”) with a share of almost 60 percent. In the United States, for example, the technology-heavy Nasdaq Composite has already gained 37 percent since the beginning of the year, and a share like Apple has gained 50 percent. This is followed by speculation that share prices in Japan will continue to rise. The Nikkei 225 has gained around 25 percent in value this year. They are also counting on falling share prices in China.
Based on portfolio holdings, the fund managers favor cash, emerging market equities, healthcare, alternative investments, consumer discretionary, technology and bonds. They are particularly negative on equities in general, UK and US stocks in particular, as well as utilities, property, banks and commodities. In addition, there has been the largest overweight in industrial stocks since February 2022. At the same time, there has been the most significant decline in healthcare stocks since January 2021.
Christian Siedenbiedel Published/Updated: , Recommendations: 62 A comment by Daniel Mohr Published/Updated: , Recommendations: 7 Hanno Mußler Published/Updated: , Recommendations: 29
Accordingly, the greatest risk for the markets remains high inflation, coupled with political mistakes. That’s what 45 percent of respondents say. A credit crunch in banks (18 percent, up from 35 percent in April) follows, along with a world recession, a worsening of geopolitics, or the bursting of an artificial intelligence or technology bubble. As for the impact artificial intelligence could have in the next two years, 42 percent of respondents cited higher profits, 1 percent more jobs, and 16 percent both. 29 percent believe that neither will occur.
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